Adaptability: Using Change for Competitive Advantage
The PR & MA environment is evolving at a fast pace and securing access at the right price remains challenging.
Successful adaptation is the key to effectively succeed in this ever-changing world, however, most companies find adapting to change difficult.
In this series, we will explore the principles to successful adaptation and discuss how companies can use these to effectively transform pricing & reimbursement and market access (PR & MA) strategies and operations.
The PR & MA environment is evolving at an ever faster pace
The increasing implications of austerity, changing definitions of value, and reforms in legislation are some of the key high impact environmental changes.
Austerity – this is a word we are used to hearing in the pharmaceutical environment, historically less so in the US, however, this too is changing. At the American Society of Clinical Oncology (ASCO) meeting this year, the cost of new cancer therapies was questioned: “Cancer drug prices are not related to the value of the drug. Prices are based on what has come before and what the seller believes the market will bear“.1The definition of a drug’s value is changing as a result. With it comes the importance of real world evidence and ‘big data’. In response to the concerns over rising drug prices, and the need to more accurately define the value to the patient, the ASCO Value Framework was developed this year. The framework assesses the value of new cancer therapies based on clinical treatment benefits (efficacy), toxicities (safety), and costs (efficiency).
Changing definitions of value – despite a move towards redefining value, an OECD report reviewing P&R processes across 14 international countries, concluded there is no evidence that innovation, or wider societal benefits are considered in price and reimbursement decisions.2 Patient centricity has become somewhat of a buzz word in the last 2 years, perhaps in response to industry’s need to justify a drug’s value, and its beneficial impact on the patient and society.
A new specialist model – biosimilars are being perceived as a big step towards reducing drug budgets post the biologic patent expiries due through 2020. A spend cut of $44bn on biologics was recently estimated as a result of biosimilars over the next 10 years.3 In addition to an increase in biosimilars, we are seeing an influx of orphan drug development and approvals, with sales estimates reaching $176bn in 2020.4
Reforms in reimbursement legislation – countries have been reforming their healthcare and changing legislation to balance drug budgets in an era of austerity. We await to see the true benefits of the Affordable Care Act in the US. EUNetHTA has long been calling for harmonization of HTA assessments, and recently the EU has commenced a pilot program known as Shaping European Early Dialogues (SEED). The program facilitates early dialogue between EMA, European Health Technology Assessment (HTA) reimbursement bodies, and selected companies with late-stage clinical development programs in an effort to harmonize regulatory and reimbursement timelines and requirements.
Reforms in price setting legislation – price setting legislation also continues to change dramatically and with the domino effect of international reference pricing, the changes in one country can have a knock-on impact on other countries and regions. In the last few months alone, we have seen a change in the exchange rate setting rule in Turkey and expanded reference country basket in Switzerland. With further developments expected in the LatAm region including reference basket changes in Brazil and additional countries predicted to adopt international reference pricing, changes in price setting legislation are set to continue. In addition, another trend on the rise is the clubbing together of country governments to purchase pharmaceuticals increasing purchasing power to negotiate pharma prices and gain better discounts. Netherlands and Belgium recently announced a joint purchasing agreement for orphan drugs and the European Commission approved a Joint Procurement Agreement allowing EU member states the ability to procure pandemic vaccines and other medicines as a purchasing body. How far this trend will go and the impact on global prices is still yet to be seen.
These environmental changes make for a challenge in successful PR&MA strategies.
Consider these facts:
– $4bn on average is spent on R&D investment5
– 50% of drugs are not reimbursed6
– It takes an average of 167 days to get to market in EU countries7
– 66% launches fail sales targets8
– Less than 1% of US biotech companies remain net positive9
– Price optimization of 1% is equivalent to a 10% increase in profit
Adapting to change is critical in order to survive
According to Darwin’s Origin of Species, ‘it is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself’10. Clearly adapting to change is critical, and we’ve seen above the extent of change in the PR&MA environment, which begs the question: why do life science companies resist change?
There are many reasons why companies and their employees struggle to adapt to change, and moreover, PUSHBACK to resist change. Working with a range of life science companies over the years, we have seen commonalities in the way that resistance to change is expressed. Interestingly, this does not differ by company size, or geographic location, or even culture.
PUSHBACK: most frequent expressions of resistance to change
Poor communication – not communicating the need and reason for change, or the implications and what individuals need to do to effect such change. Communications that contradict each other will also hamper the change process and increase employees’ uncertainty about the future outcome.
Unknown – fear of the unknown is one of the biggest antagonists of change. Understanding the risk of no action vs change, and believing the risks are reduced if the company undergoes changes, is essential in order to increase employees’ assurance.
Success – senior managers are often the victims of their own success. A history of taking positive strategic and operational decisions can hamper the extent that change is considered, make individuals overconfident, and worryingly lethargic.
Habit – no doubt you have heard the expression within your company ‘we don’t do it like that here’. Innovation is frequently hindered by habit and a fear to leave the comfort zone. This is not the same as a sharing culture, where the company is unified towards a single vision.
Benefit – not understanding the benefit of change or seeing the reward from a team or individual perspective can cause serious pushback. Employees need to understand ‘what’s in it for me?’ rather than only be told about the bigger company perspective.
Accountability – Ron Hashkenas wrote in the Harvard Business Review that “The content of change management is reasonably correct, but the managerial capacity to implement it has been woefully underdeveloped”.11 We have seen accountability for change to an individual, or team, is often made inappropriately or avoided altogether.
Common mind-set – specialist organizations often look to their peers as a recruiting ground. This is especially true of orphan or ultra-orphan companies, where an individual’s specialist knowledge and experience is essential. This can mean individuals are recruited from the same company, and the ‘way that we do it here’ mentality is implemented in the new organisation.
Knowledge and competence – in order to determine whether change is needed, and how to effect such change, individuals need be aware of the ongoing environmental changes. There are so many consistent changes externally, that teams need to have the knowledge and competence to a) filter data and information into meaningful insights, and b) make the best decision based on those insights.
PUSHBACK goes someway to answer why companies resist change, and explain why around 70% of changes attempted in organizations fail.12 In working with many companies over the years, we have developed an adaptability framework which fosters the 5 factors for successfully adapting to change.
In this series, we will be exploring each of the 5 factors, and discuss how these can be employed successfully across the industry to effectively transform price and access strategies. The next article will review the importance of the ongoing environmental scan, and multi-dimensional insights.
Find out more at:
Global Pricing Innovations
Eye For Pharma
Dennis, M, Drugmakers urged to tackle increasing cost of new cancer therapies, FirstWord Pharma, 2015
Hermant A et al, The secret of successful drug launches, McKinsey&Company March 2014
From biotech companies funded since 1980, <1% remain net positive: Jonathan Norris, SVB Capital 2011
Megginson, ‘Lessons from Europe for American Business’, Southwestern Social Science Quarterly (1963) 44(1)
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